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    Department of Systems Engineering and Engineering Management

                       The Chinese University of Hong Kong

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Date: Friday, April 5, 4:30 pm – 5:30 pm

Venue: ERB 513, The Chinese University of Hong Kong

Title: Optimal Trading with Speed-Dependent Transaction Cost Rates: A Nonparametric Model

Speaker:  Prof. Shuaijie Qian, The Hong Kong University of Science and Technology

Abstract:

The effective transaction cost rate (TCR) incurred by a large trade often depends on the execution speed. We propose a continuous-time work-horse model to study optimal trading strategies with speed-dependent TCRs. The TCR function is largely non-parametric and can approximate general TCR functions of trading speeds. Applying our framework to order execution problems, we theoretically characterize the structure of the optimal trading strategy and numerically analyze it extensively after calibration. When the order to be executed is large, our model implies simultaneously order-shredding strategy and U-shaped trading speeds over time, both of which are commonly observed in practice. Moreover, we show that adopting some intuitive but suboptimal trading strategies can be costly.

Biography:

Dr Shuaijie Qian is an Assistant Professor in Department of Mathematics, The Hong Kong University of Science and Technology. He obtained Ph.D. from National University of Singapore in 2020. His research interest falls into stochastic control problems arising from mathematical finance and financial engineering problems. His recent works cover portfolio selection with market frictions, non-standard utility maximization, and principle-agent contract design problem.  

Everyone is welcome to attend the talk!

SEEM-5202 Website: http://seminar.se.cuhk.edu.hk

Email: seem5202@se.cuhk.edu.hk